24 May 2006

I was interviewed today by Derryn Hinch about how consumers might react to the purchase of Uncle Tobys by Nestlé (in partnership with General Mills for the breakfast cereals). The short answer (as always) is that it depends...! Some may be concerned and react unfavourably to the acquisition of this "iconic" Australian brand by a global giant like Nestlé. This might even lead those consumers to avoid buying Uncle Tobys products. At the other end of the consumer spectrum, many just won't notice or care about a change of ownership, especially if there is no discernible change to the products that appear under the Uncle Tobys name.

Between these two extremes, the reaction of the majority of Australian consumers will depend on how aggressive Nestle is in "Nestlé-ising" the Uncle Tobys brand and/or trying to reposition it.

Uncle Tobys has long emphasised its Australian-ness, e.g. through its involvement with sports such as surf lifesaving and in many of its advertising and packaging images. Consumer perceptions of Nestlé as a large multinational or global firm with many different product lines and areas of operation could conflict with current perceptions of Uncle Toby's as a small(er) Australian company making Australian products (notwithstanding the fact that it has been New Zealand-owned for some time... close enough?), giving consumers less reason to prefer Uncle Tobys products over competing brands.

Uncle Tobys brand positioning is also built around the idea of "wholesome" breakfast and snack foods based on cereals and fruit. By contrast, Nestlé is perhaps better known to Australian consumers for convenience and indulgence products like Milky Bar, Kit Kat, Aero, Nesquik, Milo, as well as Nestle Peters icecream brands like Heaven. This might also create conflicting or negative brand associations for a Nestlé Uncle Toby's or Uncle Toby's by Nestlé brand, especially among parents concerned about their children's nutrition and childhood obesity.

I have no wish to fan the flames, but it should be noted that Nestlé has long been the subject of an international boycott by a small but vocal group of consumers who hold that Nestlé has acted and continues to act unethically in its marketing of infant formula in the third world. While this began as long ago as the 1970s, it is an association with the Nestlé brand that still surfaces in consumer focus groups today. For some Australian consumers, this alone will be enough reason for them to stop them buying Uncle Tobys products immediately.

Just how obviously and rapidly Nestlé will communicate its ownership of Uncle Tobys in advertising and product packaging remains to be seen, as there are some contradictory precedents. Nestlé has prominently re-branded Peters ice cream ("The health food of a nation") as Nestlé Peters, and what were once Rowntree confectionery brands are now Nestlé Kit Kat and Nestlé Aero respectively. The Nestlé products that already compete with Uncle Tobys in the breakfast cereal category - Nesquik, Milo and Cheerios cereals - are also very prominently Nestlé branded. On the other hand, Nestlé has (so far) let the Life Savers brand stand alone, and you won't find the familiar Nestlé logo on a pack of Purina Lucky Dog!

In summary, I would advise Nestlé to go very gently on the corporate (Nestlé) branding of Uncle Tobys, at least until they have done some thorough consumer research to establish what negatives might be associated with the change of ownership. It's a significant investment: Nestlé has paid about 11.5 times the 2005 earnings of Uncle Toby's, reflecting a very high valuation for the goodwill and potential of the Uncle Toby's brand. But whether it's brand extension or brand acquisition, the relationship between one brand and another is always a two-way street. It's possible, in a worst-case scenario, that negative consumer reaction to the acquisition could render the Uncle Tobys brand LESS valuable in the hands of Nestlé than it was under Burns Philp's ownership.

15 May 2006

Only a fool would argue that Arnott's does not have brand equity in the name "Mint Slice", one of its well-known chocolate biscuits. The faith of Arnott's and FMCG giant Unilever in the value of this equity has recently been demonstrated through a co-branding arrangement between the two firms: Streets Blue Ribbon Mint Slice tub ice-cream and then the Streets Cornetto Arnott’s Mint Slice (quite a mouthful). More recently, Arnott's has itself moved closer to the confectionery category with its Mint Slice Balls brand extension (as pictured on the right)

Yet it may surprise you to know that Arnott's does not have a Trade Mark for the words "Mint Slice". Registration of the mark was refused by a Hearing Officer of the Australian Trade Marks Office (now IP Australia) in June 1998. You can download the decision as a PDF here. In summary, the officer found that the words "mint slice" were not capable of distinguishing the applicant’s (Arnott's) goods. Obviously they didn't ask members of my family... when my wife and daughter (both self-confessed chocaholics) hear the words "mint slice", they immediately and unequivocally call to mind goods from a particular source, namely Arnott's.

It turns out that Arnott's had in fact conducted and submitted a survey of 1200 Australian consumers which found: (1) 69% of people who said they were familiar with Mint Slice recognised Arnott's as the manufacturer; and (2) of those who were aware of Mint Slice and said they knew which company manufactured it, 91% named Arnott's.

Pretty convincing, you might think? Apparently not to the the Hearing Officer, who seemed more concerned with the 7% of respondents who associated the product with two manufacturers other than Arnott's, and rejected the (very plausible, in my view) explanation that these respondents had done so in error, or were simply guessing.

As a result, Arnott's has no claim under the Trade Marks Act to prevent competitors like Nestlé from using the words "Mint Slice" on its "Mint Slice Bites". Interestingly, Nestlé even uses the words "Mint Slice" on the packaging in the same manner as it uses the brand names "Kit Kat" and "Violet Crumble" on other products in its "Bites" range.

So, Arnott's has strong brand awareness for "Mint Slice" - more than enough to convince Unilever of the benefits of co-branding (it has done the same with another famous Arnott's brand, "Tim Tam") - but can't prevent others from hijacking that equity.

This is another powerful demonstration of the disconnect between the Trade Marks system and the realities of marketing and consumer response. However, it's also a salutory lesson in the difficulties you are likely to face if (under the current Trade Marks system) you choose to build a brand around a name that could be construed as "descriptive", as discussed on this blog a few weeks ago.

14 May 2006

Were you one of the 150,000 "community leaders" who were mailed - in an envelope marked "private and confidential" - an "exclusive invitation" to the opening of the Commonwealth Games from Games supremo Ron Walker himself? Of course, as was well covered in the media at the time, a very wide variety of Victorians received them, including my wife and her Pilates teacher, but not me (do I sound bitter?), and at least 40 people who were no longer leading the community but rather some kind of heavenly choir. That's right, even dead people were being sought to liven up the Opening Ceremony. This was widely perceived as a desperate response by Ron and his team to low ticket sales - here's how The Age reported it. The term "community leaders" sounds like direct marketing (DM) industry code for high income earners, but there were plenty of pensioners... and, of course, not many people continue to earn income posthumously, notable exceptions being Elvis, John Lennon, etc.

Now the Accor hotels group - owner of the Sofitel, Novotel, Mercure, Ibis and Formule 1 accommodation brands - has taken a leaf out of the Ron Walker marketing manual. My late father-in-law Ernie, who passed away early in 1998 (yep, that's more than 8 years ago) has just received an exciting mailing from the Accor Première Vacation Club, a "holiday ownership" scheme (the sort of thing that used to be called "timeshare") that is a joint venture between Accor and the property developer Becton.

According to the letter from a Mr Benjamin Jones, Ernie is in a "very select group" and was "selected" to receive a "reward" with a retail value of up to $800, the only catch being (what, you didn't realise there would be one?) that he would be required to sit through a lengthy sales pitch (sorry, a 90-minute "holiday ownership preview") and doubtless be subjected to significant pressure to sign up or make some other commitment before taking up his "reward".

So just how bad is Accor's mailing list? The "Frequently Asked Questions" section on the reverse of the letter says "You are one of the select few able to take part in this promotion. You have been chosen to receive this special offer based on certain demographics, past promotions or personal buying habits". The reality: Ernie has (of course) not travelled anywhere, bought anything, responded to a promotion or used a credit card in eight years, so the "selection" process certainly isn't based on any recent market activity or response. What about "demographics"? Well, if Ernie were still alive, he would be aged 81 - definitely not a prime candidate to invest in timeshare!

In fact, based on the way in which the letter was addressed, it is clear that the only way Accor's DM people specially "selected" Ernie to receive this "exciting package" is by using the White Pages. Yes, he's still in the phone book and that's where Accor has gone trawling.

Receiving mail for a departed loved one can be distressing, but I prefer to look at it this way: next time I receive a personally addressed "special offer" and I'm tempted to feel flattered that some company has identified me as a highly desirable customer, instead I'll simply think fondly of Ernie, and smile as I am reminded (as if I needed to be) of just how abysmally poor so much direct marketing has become.

By the way, while Accor is a French company, Becton is ASX-listed with Australian shareholders. If I owned Becton shares, I would be livid at this example of a marketing practice that is dumb, ham-fisted, "bottom-feeding" and wasteful, when I expect modern marketing strategies to be based on shareholder value. How much of Becton's potential profits and dividends are being used to send unsolicited, misleading and untruthful material to unqualified prospects with zero chance of response?

08 May 2006

I have a confession to make: I don't frequent the part of the chilled dairy section in the supermarket where one finds products like National Foods' "YoGo" - the sort of thing Americans call "pudding". Hence I have already missed the arrival of Nestlé Heaven mousse, which joins Nestlé regular (no sub-brand) mousse and Nestlé Milo Mousse in the... mousse category? There's now more mousse in the dairy cabinet than in the Canadian Rockies!

Is there room for three different mousses (meesse?) from Nestlé? Are they optimally positioned for different target segments, and are their value propositions sufficiently distinct? Time will tell, I guesse.

*If you're wondering about the title for this entry, it's a variation on a well-known misheard lyric from the song Don't Stop Believin', the 1981 hit from power ballad specialists Journey (see Google search here).

04 May 2006

First there was Heaven on a stick. Then came Heaven in a tub. Now there's Heaven in a bar and Heaven in a block.

The Heaven ice-cream range (from Peters, later Nestlé Peters) was designed to counter the success of Unilever's Streets Magnum in the "premium impulse" category in the early 1990s. In 2005, after lagging Magnum in terms of sales and share for a long time and never really capturing consumers' hearts and minds, Heaven was re-launched in new packaging designed to communicate "premium", with high-quality "foodie" imagery (and, at the same time, to put more distance between it and Magnum).

But while brand identity and brand positioning may be conceived on a whiteboard or in a creative agency's persuasive proposals, the brand lives in the mind of the customer! Just because you've implemented a repositioning exercise, as Heaven has along the dimension of "indulgence", doesn't mean you have immediately respositioned the brand in the mind of the consumer.

Perhaps Nestlé thinks it can convince consumers that "Heaven = premium indulgence" simply by applying the brand to other indulgences... like chocolate. Which begs the question: why not Heaven cigars or a Heaven day-spa, as these are also considered premium indulgences by many?

Firstly, this strategy assumes that Heaven has strong brand awareness and preference in the categories it's already in, and if this WASN'T the case in late 2005 when they re-launched the packaging, then it's hard to believe that it IS the case barely six months later. Brand equity and brand associations take time to build.

Second, it's likely that many consumers still think of Heaven as a Peters sub-brand, like the Peters Drumstick. Nestle has retro-fitted the Nestlé parent brand name to Peters only since it bought Peters from Pacific Brands (as it has with Life Savers, Anticol, etc.). But the new Heaven chocolate extensions just say "Nestlé", that is, there's no "Peters".

And then there's cannibalisation. Nestlé's Kit Kat is also being extended in the direction of "indulgence" in the form of Kit Kat "Temptations", as we've noted here previously. Assuming that Australian consumers have a finite demand for chocolate confectionery, something's gotta give. In order to buy "premium indulgent" Heaven chocolate, people have to NOT buy another brand of chocolate, even if they move up-market (e.g. from regular Kit Kat or Aero or a Wonka bar - all Nestlé brands). Where will Heaven's share come from in chocolate? Does Heaven know? What is the risk that one Nestlé brand will simply eat another?

On the other hand, I suppose Nestlé may argue that the extensions, through their feedback effects, will help to better define the meaning of the Heaven brand for consumers. Seems like a long shot to me...

PS: While I seem to rant a lot about injudicious brand extensions at Nestlé, please don't think that (a) I have something against the Nestlé company and the people who work there, or (b) I think they are the only FMCG company suffering from hyper-extension-osis. However, I do think one can infer from the conduct of Nestlé globally (and not only in Australia) that people very high up in the firm have a very strong belief in the power of the brand (which I support), coupled with a very narrow, uni-directional and short-term notion of how brand equity should be exploited (which I think is dangerous).

UPDATE 7 MAY 2006: Just checked on IP Australia's ATMOSS Trade Marks database: Effem Foods (Mars, Inc.) has a registered mark in Class 30 that includes the words "Dove Heavenly White" for white chocolate, and Aldi Stores also have a Trade Mark application under examination for "Hazelnut Heaven" in Class 30. Could be interesting...!